BCRA regulates the expansion of instruments for long-term savings and credit facilities

Following the recent enactment of Act No. 27,271, the Central Bank of Argentina (BCRA) issued today a regulation on the expansion of instruments for long-term savings and credit facilities, which increases the chances to access housing and saving, while protecting the purchasing power of households across all economic segments.

The BCRA regulation brings about the following changes:

- In line with Act No. 27,271, which established the Housing Unit (Unidad de Vivienda, UVI) as the instrument to adjust loans and deposits in terms of the construction cost index, the BCRA changed the existing UVIs (an instrument of adjustment for inflation (CER)) for UVAs (Purchasing Power Units). Thus, existing CER-adjustable mortgage-backed loans and time deposits shall change their name from UVI to UVA. The change is limited to the name of the instruments and has no effect whatsoever upon the agreed contractual terms and conditions.

- The new UVIs, which shall have an initial AR$14.05 value (just like the UVA) on March 31, 2016, was set as a thousandth part of the average construction cost per square meter worked out on the basis of available figures for different types of real property located in the Cities of Buenos Aires, Cordoba, Rosario, Salta, and the coastal region (Parana de la Vera Cruz and Santa Fe). They shall be adjusted by the construction cost index for Greater Buenos Aires (ICC) published by the INDEC for a Model 6 single housing unit. Thus, banks may offer deposits and mortgage-backed loans in UVIs as well as deposits and loans for any other purpose in UVAs. The BCRA shall post the value of UVIs and UVAs on its website on a daily basis.

Additionally, savings accounts for both units are established. Under this new system, depositors may make deposits in UVIs at a minimum 90-day period or in UVAs at a minimum 180-day period. In both cases, once these periods have elapsed funds will continue to be adjusted by their corresponding indexes until their withdrawal. These savings accounts will be free of charge and banks may pay interest on their balance.

- Savings accounts in UVIs may take deposits from underage children through their legal representative. The funds so deposited shall neither be transferred nor disposed of (interest included) until the minor becomes of age. Nevertheless, funds may be transferred to another bank under the same conditions described above.

It should be noted that, since such savings accounts were implemented by BCRA’s Communication A 5945, financial institutions have granted UVAs-adjusted mortgage-backed loans for $272.9 million and have taken time deposits in UVAs for $133 million.

The expansion and regulation of instruments for long-term savings and credit facilities in pesos shall contribute to deepening the financial system—in compliance with one of the key objectives in the BCRA’s administration—,thus promoting development with social equity as established by the Central Bank’s Charter.

September 15th, 2016